RBNZ 'not about to shoot down' soaring kiwi

The Reserve Bank is unlikely to try to tame the New Zealand dollar by way of currency market intervention any time soon despite the kiwi's series of 12 month highs against the greenback, says Westpac market strategist Imre Speizer.

The local unit hit yet another one year high of US70.85c early on Saturday but softened and closed at US69.78c yesterday.

Speizer said the kiwi weakened about 20 points on soft retail sales data but then moved lower again with other currencies as the US dollar firmed.

The greenback has softened in recent months as investors, heartened by US equity market gains, sought out risk assets including the so-called "commodity currencies" such as the kiwi.

Unless there was any pullback in US equities, the kiwi, along with other major non US currencies, was set to make further gains.

"There's very strong resistance around the US74c mark and you might get a bit of stickiness around US72c."

Speizer said US74c did not just represent technical resistance, it was where the market might get nervous about the prospect of RBNZ intervention given its previous but infrequent action had been around that level.

The RBNZ does not disclose its currency intervention efforts and has a strict set of criteria around direct action which Speizer did not believe were likely to be met at present.

"It works least when you're going against the wind, and the wind at present is blowing it higher."

Last week RBNZ Governor Alan Bollard told Parliament's finance and expenditure committee that central banks' attempts to rein in commodity currencies in other countries had proved fruitless. Even the Swiss had failed to influence the level of their franc by way of forex intervention. "Jawboning" by Canada's central bank had also met with little success.

RBNZ head of financial market research David Drage told the committee that turnover in the New Zealand dollar on international forex markets had fallen sharply in the aftermath of the financial crisis.

The reduction in turnover or liquidity may serve to amplify its movements, he indicated.

Speizer said that was a "plausible" explanation for why the kiwi had outperformed the Australian dollar in recent months despite that country's higher official interest rate and brighter economic fundamentals.